San Francisco’s commercial office vacancy rate continues to be the highest in the U.S., raising questions on how the metro area can come back from the economic damage, caused in large part by remote and hybrid work.
According to preliminary data from real estate brokerage CBRE, as reported by the San Francisco Chronicle, the city’s office vacancy rate reached a record 33.9% in the third quarter of this year.
This figure translates to roughly 30 million square feet (nearly the area of Central Park in New York City) of office space listed for lease or sublease.
The rise of remote and hybrid work has had cascading effects on the city’s economy. With fewer employees returning to corporate offices in the city’s commercially dense areas, there’s been a decline in tax revenue and many restaurants and retailers have decided to close their doors. Commercial landlords have also felt the financial pinch, with some losing their properties to foreclosures.
However, some experts believe there is a glimmer of hope on the California horizon. Colin Yasukochi, executive director of CBRE’s Tech Insights Center, shared an optimistic outlook with the San Francisco Chronicle, suggesting that AI startups could fuel a positive growth cycle in the city’s future that could revitalize the office market and boost the city’s economy — though it will probably take a couple of years. The chronicle reports that while there’s a surge in interest from prospective tenants, with demand for 5.2 million square feet of space, not all of this will translate into signed leases.
The pandemic has reshaped the country’s relationship with traditional workspaces, and even if start-up industries like AI bring about a resurgence in commercial leases, the transition won’t be instantaneous, or smooth.